Accounting Expert Answers & Study Resources : Page 633

Joint Ventures, Push-Down Accounting, and Leveraged Buyouts 11.If a single joint venturer has a venture interest in excess of 50%: a.all other venturers must have equal voting rights. b.the venture must use parent company/subsidiary accounting rather than venture accounting. c.the venture may be organized as a partnership, but not as an undivided interest. d.the venture.

Exercise 6 Pretax operating incomes of Patterson Corporation and its 70%-owned subsidiary, Hamilton Corporation, for the year 2003, are shown below. Hamilton pays total dividends of $60,000 for the year. There are no unamortized cost-book differentials relating to Patterson’s investment in Hamilton. During the year, Patterson sold land to Hamilton for.

Exercise 10 Pascal Corporation owns a 90% interest in Soto Corporation. At December 31, 2002, Pascal had $2,000,000 par value of 8% bonds outstanding with an unamortized discount of $40,000. The bonds have interest payment dates of January 1 and July 1 and mature on January 1, 2008. On January 2, 2003,.

Exercise 10 At January 1, 2002, the stockholders’ equity of Parvo Corporation and its 60%-owned subsidiary, Swenson Corporation, are as follows: Parvo Swenson Common stock, $10 par value $ 700,000 $ 400,000 Retained earnings 800,000 50,000 Totals $ 1,500,000 $ 450,000 Swenson’s net income for 2002 was $40,000. Parvo’s Investment in Swenson account balance on December 31, 2002 was equal to its underlying equity on December 31,.

Multiple Choice Questions 1.Material constructive gains and losses from intercompany bond holdings are: a.classified as a part of consolidated stockholders’ equity because they do not represent real gains and losses to the consolidated entity. b.included as other items of revenue or expense in the consolidated income statement. c.classified as extraordinary items in the consolidated.

Exercise 4 Crocker Corporation paid $225,000 for a 70% interest in Saperstein Corporation on January 1, 2003. On that date, Saperstein’s balance sheet accounts, at book value and fair value, were as follows: Book Value Fair Value Assets Cash $ 25,000 $ 25,000 Accounts receivable-net 45,000 55,000 Inventories 40,000 60,000 Property, plant, and equipment-net 140,000 125,000 Total assets $ 250,000 $ 265,000 Equities Accounts payable $ 40,000 $ 40,000 Common stock 120,000 Retained earnings 90,000 Total liab. & equity $ 250,000 Required: Prepare a balance sheet for Saperstein.

Exercise 3 Separate company and consolidated income statements for Perzee and Shiela Corporations for the year ended December 31, 2003 are summarized as follows: Perzee Sheila Consoli- dated Sales Revenue $ 500,000 $ 100,000 $ 600,000 Income from Sheila 19,900 Bond interest income 6,000 Gain on bond retirement 3,000 Total revenues 519,900 106,000 603,000 Cost of sales $ 280,000 $ 50,000 $ 330,000 Bond interest expense 9,000 3,600 Other expenses 120,900 31,000 151,900 Minority interest income 7,500 Total expenses 409,900 81,000 493,000 Net income $ 110,000 $ 25,000 $ 110,000 The interest income and expense eliminations relate to a.

Exercise 3 Pat Corporation acquired an 80% interest in Sen Corporation on January 1, 2003 for $20,000. Balance sheet and fair value information on this date is summarized as follows: Pat Book Value Sen Book Value Sen Fair Value Current assets $ 15,000 $ 9,000 $ 9,000 Land and Building-net 35,000 7,000 7,000 Equipment 8,000 4,000 6,000 Total assets $ 58,000 $ 20,000 $ 22,000 Liabilities $ 27,000 $ 10,000 10,000 Capital stock 18,000 4,000 Retained earnings 13,000 6,000 Total liab. & equity $ 58,000 $ 20,000 Required: 1.Prepare an entry on the books of Sen Corporation to record the push-down.

Exercise 7 Josephus Corporation acquired 70% of the outstanding voting common stock of Flavius Corporation in 1998. On January 1, 1999, Flavius Corporation purchased a depreciable machine for $120,000 cash with an estimated useful life of 10 years that was depreciated on a straight-line basis. Flavius used the machine until the.

Multiple Choice Questions 1.Packer Corporation owns 70% of Shanna Corporation and Shanna owns 40% of Tonya Corporation. Packer owns 30% of Tonya. What percentage of Tonya do minority interests hold? a.28% b.30% c.42% d.58% 2.Pike Corporation acquired a 60% interest in Snow Corporation at a price $40,000 in excess of book value and fair value on.

Exercise 7 At the beginning of 2003, George Corporation held a 60% interest in Ringo Corporation. The investment account balance was $1,084,000, consisting of 60% of Ringo’s $1,666,666 of net assets and $84,000 of goodwill. During 2003, Ringo earned $150,000 and paid dividends of $55,000 on November 1. On October 1, 2003,.

Exercise 3 Scratch Corporation owns a 90% interest in Jordan Corporation. Throughout 2003, Jordan had 20,000 shares of common stock outstanding and Scratch has 50,000 shares of common stock outstanding. Jordan’s only dilutive security also consists of 10,000 stock options. It takes 4 options plus $20 to acquire one share of.

Exercise 9 P Corporation owns 90% of the outstanding voting common stock of S Corporation. On January 1, 1998, S issued $1,000,000 face amount of 12%, $1,000 bonds payable at 119.20. The bonds pay interest on January 1 and July 1 of each year and mature on for on January 1,.

Exercise 1 Poke Corporation paid $240,000 on April 1, 2003 for all of the common stock of Snap Corporation in a purchase business combination. Snap’s stockholders’ equity at April 1 consisted of the $195,000 January 1, 2003 stockholders’ equity of Snap plus first quarter income less dividends. Dividends are paid quarterly..

Exercise 1 Stuart Corporation’s stockholders’ equity on December 31, 2002 was as follows: 10% cumulative preferred stock, $100 par value,   callable at $105, with one year dividends in arrears $ 10,000 Common stock, $1 par value 50,000 Additional paid-in capital 150,000 Retained earnings 160,000 Total stockholders’ equity $ 370,000 On January 1, 2003, Trent Corporation paid $300,000 for a 70% interest in Stuart’s underlying.

Exercise 4 On September 1, 2003, Planck Corporation acquired an 80% interest in Scavenger Corporation for $700,000. Scavenger’s stockholders’ equity at January 1, 2003 consisted of $200,000 of Common Stock and $600,000 of Retained Earnings. The book values of its assets and liabilities were equal to their respective fair values on.

Exercise 5 At January 1, 2002, the stockholders’ equity of Parveen Corporation and its 52%-owned subsidiary, Senco Corporation, are as follows: Parveen Senco Common stock, $10 par value $ 700,000 $ 400,000 Retained earnings 800,000 50,000 Totals $ 1,500,000 $ 450,000 Senco’s net income for 2002 was $50,000. Parveen’s Investment in Senco account balance on December 31, 2002 was equal to its underlying equity on December 31,.

Exercise 10 On January 1, 2003, Badger Corporation acquired an 80% interest in Gopher Corporation for $184,000. Gopher’s net assets on this date had a book value of $160,000 and a fair value of $210,000. The excess of fair value over book value at acquisition was attributable to $20,000 of understated.

Exercise 3 Poe Corporation owns an 80% interest in Sen Corporation, acquired on January 1, 2002 for $700,000 when Sen’s stockholders’ equity consisted of $600,000 of Capital Stock and $200,000 of Retained Earnings. Sen Corporation acquired a 60% interest in Tap Corporation on July 1, 2002 for $180,000 when Tap had Capital.

11.Bond Interest Expense for 2003 on Patty’s bonds should be reported in the consolidated income statement at: a.$40,000. b.$43,200. c.$45,700. d.$54,000. 12.Bonds Payable and Interest Payable, respectively, will appear in the December 31, 2003 consolidated balance sheet of Patty Corporation and Subsidiary in the amounts of: a.$720,000 and $21,600. b.$720,000 and $27,000. c.$900,000 and $21,600. d.$900,000 and $27,000. Use the.

Exercise 9 Alvin Corporation owns 80% of Bevis Corporation, Bevis Corporation owns 60% of Caleb Corporation, and Caleb Corporation owns 10% of Alvin Corporation. The separate incomes (excluding investment income), of Alvin, Bevis, and Caleb are $300,000, $100,000, and $80,000, respectively. Required: Calculate the consolidated net income for Alvin Corporation and.

Exercise 7 John Corporation owns 90% of Cary Corporation, Cary Corporation owns 85% of Fresno Corporation, and Fresno Corporation owns 5% of Cary Corporation. The separate incomes (excluding investment income), of John, Cary, and Fresno are $200,000, $80,000, and $110,000, respectively. Required: Calculate revised net incomes for John, Cary, and Fresno.

Exercise 6 Pantera Corporation owns a 70% interest in Sontex Corporation. At December 31, 2002, Sontex had $1,500,000 of par value 12% bonds outstanding with an unamortized premium of $30,000. The bonds have interest payment dates of January 1 and July 1 and mature on January 1, 2007. On January 2, 2003,.

Exercise 8 S is an 80%-owned subsidiary of P. On January 1, 2002, S issued $300,000 of $1,000 face amount 6% bonds at $964 per bond. Interest is paid on January 1 and July 1 of each year and covers the preceding six months. On July 1, 2003, P purchased all.

Exercise 2 December 31, 2003 balance sheets for Pun Corporation, and Sir Corporation, its 90%-owned subsidiary, are presented in the first two columns of partially completed balance sheet working papers. Pun paid $160,000 for its 90% interest in Sir on January 1, 2000 when Sir had $150,000 of total stockholders’ equity..

11.In calculating parent company and consolidated EPS, it may be necessary to replace the parent’s equity in subsidiary earnings with the parent’s equity in subsidiary’s diluted EPS. This replacement calculation is an adjustment to the: a.subsidiary’s basic earnings. b.parent's basic earnings. c.parent's diluted earnings. d.parent's common shares and common share equivalents. 12.A subsidiary has some.

Exercise 5 On January 1, 2003, Peter Corporation acquired a 90% interest in Sorkin Corporation for $210,000 when Sorkin’s book values and fair values were as follows: Book Value Fair Value Assets Cash $ 26,000 $ 26,000 Accounts receivable-net 48,000 52,000 Inventories 55,000 83,000 Property, plant, and equipment-net 190,000 225,000 Total assets $ 319,000 $ 386,000 Liabilities & Equity Accounts payable $ 55,000 $ 55,000 Long-term debt 200,000 190,000 Common stock 50,000 Retained earnings $ 14,000 Required: Prepare the journal entry on Sorkin’s books to push-down the values reflected.

Exercise 8 At the beginning of 2003, Jared Corporation held a 90% interest in Riley Corporation. The investment account balance was $750,000, consisting of 90% of Riley’s $800,000 of net assets and $30,000 of goodwill. During 2003, Riley earned $165,000 and paid dividends of $75,000 on February 1. On May 1, 2003,.

Exercise 8 Jerome Corporation purchased 75% of Ragweed Corporation on January 1, 2003, for $230,000. Balance sheets for the two companies on this date, prepared just prior to the purchase, are provided below.  Jerome Book Values Ragweed Book Values Ragweed Fair Values Cash $ 330,000 $ 10,000 $ 10,000 Inventory 270,000 70,000 90,000 Buildings & equipment- net 500,000 120,000 190,000 Total assets $ 1,100,000 $ 200,000 $ 290,000 Common stock $ 300,000 $ 95,000 Retained earnings 800,000 105,000 Total equities $ 1,100,000 $ 200,000 Required: Prepare a consolidated balance sheet using the entity theory of consolidation. Exercise.

Exercise 5 Julie Corporation owns 100% of Opie Corporation, Opie Corporation owns 95% of Sams Corporation and Sams Corporation owns 80% of Fry Corporation. The separate incomes of Julie, Opie, Sams, and Fry are $300,000, $100,000, $200,000, and $300,000, respectively. All of the investments were made at times when the investee’s.

Exercise 5 Lancelot Corporation owns a 60% interest in Mink Corporation acquired several years ago at a price equal to book value and fair value.  On December 31, 2002, Mink had $900,000 par of 12% bonds outstanding with an unamortized premium of $30,000. The bonds mature in five years and pay.

Exercise 9 Pal Corporation owns 100% of Art Corporation, 90% of Benn Corporation, 80% of Fortin Corporation, 75% of Hirt Corporation, 20% of Grigg Corporation, and 8% of Rudd Corporation. All of these corporations are domestic corporations. During 2003, Pal Corporation reports net income of $1,500,000. This net income includes the.

Exercise 1 On July 1, 2002, Paige Corporation acquired a 75% interest in Swayze Corporation for $150,000. Swayze’s net assets on this date had a book value of $140,000 and a fair value of $160,000. The excess of fair value over book value at acquisition was due to understated plant assets.

Multiple Choice Questions Preferred stock 1.When subsidiary preferred stock is acquired by the parent company, the preferred stock is retired from the viewpoint of the consolidated entity. In recording its acquisition of preferred stock the: a.parent company adjusts the investment in preferred stock to its book value at acquisition and any difference between.

Exercise 3 Pent Corporation paid $40,000 cash for an 80% interest in the voting common stock of Sisk Corporation on July 1, 2002, when Sisk’s stockholders’ equity consisted of $30,000 of $10 par common stock and $15,000 retained earnings. The excess cost over the book value of the investment was assigned.

Exercise 6 At the beginning of 2003, Gem Corporation held an 80% interest in Rock Corporation. The investment account balance was $600,000, consisting of 80% of Rock’s $720,000 of net assets and $24,000 of goodwill. During 2003, Rock uniformly earned $156,000 and paid dividends of $25,000 on April 1 and again on.

Exercise 7 S is an 80%-owned subsidiary of P. On January 1, 2002, S issued $300,000 of $1,000 face amount 6% bonds at par. The bonds have interest payments on January 1 and July 1 of each year and mature on January 1, 2006. On July 1, 2003, P purchased all.

Exercise 4 Proton Corporation acquired 90% of the voting common stock of Sheffler Corporation in 2002. All excess purchase cost was attributable to goodwill. On January 1, 2003, Sheffler purchased $500,000 par value of Proton’s 8% bonds for $492,000. the bonds were issued at par and mature on January 1, 2010..

Exercise 5 Patch Corporation owns a 70% interest in Jason Corporation. Throughout 2003, Jason had 10,000 shares of common stock outstanding and Patch had 100,000 shares of common stock outstanding. Jason’s only dilutive security consists of $100,000 face amount of 8% bonds payable. Each bond is convertible into 20 shares of.

11.Using the information from Question 10, what would be the balance in the Investment in Susan account on December 31, 2003 if Michelle sold one-ninth of its interest in Susan on May 1, 2003 for $47,000 and the “beginning-of-the-period” sales assumption is used? a.$333,333. b.$334,311. c.$336,333. d.$336,711. Use the following information for questions 12 and.

11.Poe Corporation owns 80% of Shaw Corporation and has separate income of $100,000 for 2003. Shaw Corporation has separate income of $50,000 and owns 70% of the outstanding stock of Turk Corporation. Turk Corporation has separate income of $40,000. The correct amount of consolidated net income is: a.$162,400. b.$164,400. c.$172,400. d.$174,400. 12.In Question 11, the.

Exercise 8 On January 1, 2003, Rogers Corporation acquired all of the outstanding voting common stock of Ripp Corporation in a business combination.  The total purchase price for the stock was $1,300,000. Ripp’s net assets on this date were as follows: Ripp’s Book Values Ripp’s Fair Values Cash $ 20,000 $ 20,000 Inventories 210,000 240,000 Land 200,000 250,000 Building-net 600,000 900,000 Total assets $ 1,030,000 $ 1,410,000 Liabilities $ 230,000 $ 230,000 Common stock 400,000 Retained earnings 400,000 Total equities $ 1,030,000 Assume that for federal income.

Exercise 9 Cascade Corporation acquired 52% of the outstanding voting stock of Shamrock Corporation in 2001. In 2003, Shamrock included on its separate income statement a gain of $60,000 for an intercompany sale of equipment to Cascade. The equipment had a remaining useful life of 8 years on the sale date.

Exercise 1 Peja Corporation owns 80% of Stem Corporation’s outstanding common stock that was purchased at book value and fair value on January 1, 1999. Additional information: 1.Peja sold inventory items that cost $3,000 to Stem during 2003 for $6,000. One-half of this merchandise was inventoried by Stem at year-end. At December 31,.

Exercise 1 Prey Corporation owns 80% of the voting common stock of Sori Corporation and 60% of the voting common stock of Xong Corporation. Sori owns 20% of the voting common stock of Xong. There are no cost-book differentials to consider. The separate incomes of these affiliated companies for 2003 are:                            .

Multiple Choice Questions 1.A sale of an interest during an accounting period may be recorded as of the actual sale date or, as an expedient, as of the beginning of the period. Which one of the following items would not show the same amount under the two methods? a.Gain on Sale in.

Multiple Choice Questions Consolidation theories Use the following information in answering Questions 1 and 2. Parquin Corporation acquired a 90% interest in Squatter Corporation for $180,000 cash on January 1, 2003. The following information is available for Squatter at that time. Book Value Fair Value Difference Current assets $ 80,000 $ 100,000 $ 20,000 Plant assets 120,000 150,000 30,000 Liabilities ( 100,000 ) ( 100,000 ) 0 Net assets $ 100,000 $ 150,000 1.Under the entity theory, a consolidated balance sheet prepared immediately.

Exercise 7 Jerome Corporation purchased 75% of Ragweed Corporation on January 1, 2003, for $230,000. Balance sheets for the two companies on this date, prepared just prior to the purchase, are provided below.  Jerome Book Values Ragweed Book Values Ragweed Fair Values Cash $ 330,000 $ 10,000 $ 10,000 Inventory 270,000 70,000 90,000 Buildings & equipment- net 500,000 120,000 190,000 Total assets $ 1,100,000 $ 200,000 $ 290,000 Common stock $ 300,000 95,000 Retained earnings 800,000 105,000 Total equities $ 1,100,000 $ 200,000 Required: Prepare one consolidated balance sheet using the proprietary (pro-rata) theory of.

Exercise 2 Poster Corporation purchased an 80% interest in Sena Corporation for $840,000 on January 1, 2003. Sena's balance sheet book values and accompanying fair values on this date are shown below. Book Value Fair Value Entity Theory Push- Down Balance Sheet Parent Company Theory Push- Down Balance Sheet Cash $ 30,000 $ 30,000 Receivables 200,000 200,000 Inventory 300,000 360,000 Land 50,000 90,000 Plant assets-net 250,000 300,000 Total Assets $ 830,000 $980,000 Current liabilities $ 180,000 $180,000 Other liabilities 120,000 100,000 Common Stock 400,000 Retained Earnings 130,000 Total Liab. & Equity $ 830,000 Required Complete the push-down columns of Sena Corporation’s restructured balance.

Exercise 2 Pun Corporation paid $62,000 to acquire 100% of See Corporation’s outstanding voting common stock at book value on May 1, 2003.  The stockholders’ equity of See on January 1, 2003 consisted of $40,000 Capital Stock and $20,000 Retained Earnings. See’s total dividends for 2003 were $6,000, paid equally on.